Sell, sell, sell
Oliver Hahl
Organization Science, July-August 2016, Pages 929-953
Abstract:
This paper addresses why customers at times prefer traditional practices deemed more authentic to a domain, particularly where these practices had previously been discarded as inferior. I argue that customer demand for authenticity can be triggered when extrinsic rewards (i.e., fame or money) increase in prominence in a market, causing audiences to doubt the motives of the market's producers. I examine this dynamic in the context of Major League Baseball, where appreciation for traditional stadium features seemingly arose after the advent of free agency heightened awareness and coverage of the economic rewards in the sport. Experimental analysis validates the proposed mechanism, whereby increased fan exposure to extrinsic rewards increases concern about player inauthenticity, which increases preference for traditional stadium features. Quantitative analysis of attendance patterns provides external validation for these experimental findings by showing that authenticity was more highly preferred, in the form of higher relative attendance in traditional-style ballparks, by those fans more exposed to free agency. Conclusions are drawn about the role that perceptions about motives play in market perceptions of authenticity and valuation of authentic cultural objects.
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Brand Loyalty Is Influenced by the Activation of Political Orientations
Jennifer Hoewe & Peter Hatemi
Media Psychology, forthcoming
Abstract:
Using an experimental design that measures participants' actual behavior, this study tests the inclusion of a perceived outgroup in an advertisement for a well-established brand to determine if political orientations interact with an advertisement's content to predict consumption of that product. The results indicate that an advertisement's activation of one's political orientation can either change or reinforce brand loyalty. Specifically, more conservative individuals responded to the presence of Muslim and Arab individuals in a Coca-Cola advertisement by selecting Pepsi products despite their initial preference for Coca-Cola; whereas, more liberal individuals maintained their initial brand loyalty to Coca-Cola.
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Seeding the S-Curve? The Role of Early Adopters in Diffusion
Christian Catalini & Catherine Tucker
MIT Working Paper, August 2016
Abstract:
In October 2014, all 4,494 undergraduates at the Massachusetts Institute of Technology were given access to Bitcoin, a decentralized digital currency. As a unique feature of the experiment, students who would generally adopt first were placed in a situation where many of their peers received access to the technology before them, and they then had to decide whether to continue to invest in this digital currency or exit. Our results suggest that when natural early adopters are delayed relative to their peers, they are more likely to reject the technology. We present further evidence that this appears to be driven by identity, in that the effect occurs in situations where natural early adopters' delay relative to others is most visible, and in settings where the natural early adopters would have been somewhat unique in their tech-savvy status. We then show not only that natural early adopters are more likely to reject the technology if they are delayed, but that this rejection generates spillovers on adoption by their peers who are not natural early adopters. This suggests that small changes in the initial availability of a technology have a lasting effect on its potential: Seeding a technology while ignoring early adopters' needs for distinctiveness is counterproductive.
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Something to Talk About: Social Spillovers in Movie Consumption
Duncan Sheppard Gilchrist & Emily Glassberg Sands
Journal of Political Economy, forthcoming
Abstract:
We exploit the randomness of weather and the relationship between weather and moviegoing to quantify social spillovers in movie consumption. Instrumenting for early viewership with plausibly exogenous weather shocks captured in LASSO-chosen instruments, we find that shocks to opening weekend viewership are doubled over the following five weekends. Our estimated momentum arises almost exclusively at the local level, and we find no evidence that it varies with either ex post movie quality or the precision of ex ante information about movie quality, suggesting that the observed momentum is driven in part by a preference for shared experience, and not only by social learning.
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Luis Aguiar & Joel Waldfogel
NBER Working Paper, September 2016
Abstract:
We explore the consequence of quality unpredictability for the welfare benefit of new products, using recent developments in recorded music as our context. Digitization has expanded consumption opportunities by giving consumers access to the "long tail" of existing products, rather than simply the popular products that a retailer might stock with limited shelf space. While this is clearly beneficial to consumers, the benefits are somewhat limited: given the substitutability among differentiated products, the incremental benefit of obscure products - even lots of them - can be small. But digitization has also reduced the cost of bringing new products to market, giving rise to a different sort of long tail, in production. If the appeal of new products is unpredictable at the time of investment, as is the case for cultural products as well as many others, then creating new products can have substantial welfare benefits. Technological change in the recorded music industry tripled the number of new products between 2000 and 2008. We quantify the effects of new music on welfare using a simple illustrative, but explicitly structural, model of demand and entry with potentially unpredictable product quality. Based on a range of plausible forecasting models of expected appeal, a tripling of the choice set according to expected quality adds substantially more to consumer surplus and overall welfare than the usual long-tail benefits from a tripling of the choice set according to realized quality, perhaps by more than an order of magnitude.
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Hidehiko Nishikawa et al.
Journal of Marketing Research, forthcoming
Abstract:
In order to complement their in-house, designer-driven efforts, companies are increasingly experimenting with crowdsourcing initiatives in which they invite their user communities to generate new product ideas. While innovation scholars have started to analyze the objective promise of crowdsourcing, the research presented here is unique in pointing out that merely marketing the source of design to customers might bring about an incremental increase in product sales. The findings from two randomized field experiments reveal that labeling crowdsourced new products as such, that is, marketing the product as "customer-ideated" at the point of purchase versus not mentioning the specific source of design, increased the product's actual market performance by up to 20 percent. Two controlled follow-up studies reveal that the effect observed in two distinct consumer goods domains (food, electronics) can be attributed to a quality inference: consumers perceive "customer-ideated" products to be based on ideas that address their needs more effectively, and the corresponding design mode is considered superior in generating promising new products.
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When Social Capital Hurts: The Role of Human Capital Experience and Fit
Timothy Gubler
University of California Working Paper, August 2016
Abstract:
While studies have argued for and found benefits from transacting with social affiliates, it remains unclear how and when they lead to inferior outcomes for professionals and consumers. Building on social and human capital theories, I argue that social affiliations in uncertain markets can lead to unanticipated downsides that reduce overall performance when human capital considerations are supplanted by an effort to avoid opportunism. I test my argument using a novel approach that pairs data from the Wasatch Front Regional Multiple Listing Service in Utah with hand-collected data on geographically assigned LDS (Mormon) congregation boundaries. This setting allows me to identify listings for which real estate agents and home sellers share a common church congregation affiliation, and to both independently and jointly explore the impact of social affiliations and human capital on transaction outcomes. I find that on average agents sell comparable homes for 2% more and 3.5 days quicker, as well as exert more care and effort through marketing, when listing for affiliates. However, consistent with my theory, I find that sellers are much more likely to use inexperienced agents or agents with poor fit (i.e., specialize primarily in buying homes) when affiliations are present. Such cases result in lower sale prices and reduced agent performance, suggesting a downside to social ties from human capital deficiencies. These results indicate a more nuanced view of social capital is needed that incorporates the selection process and the potential for poor fit in transactions.
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Julio Sevilla & Claudia Townsend
Journal of Marketing Research, forthcoming
Abstract:
The authors identify and examine the effect of space-to-product ratio on consumer response; very generally, consumers perceive products as more valuable when more space is devoted to their display. In both lab and field studies, the authors find that this phenomenon influences total sales, purchase likelihood, and even perceived product experience (taste perceptions). More interstitial space increases perceptions of individual products as more aesthetically pleasing and the store as more prestigious. The authors find these effects across a variety of product categories and rule out a number of competing alternative explanations that are based on perceptions of product popularity, scarcity, assortment search difficulty, and messiness.
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Paul Povel et al.
Journal of Finance, October 2016, Pages 2287-2332
Abstract:
We study the performance of investments made at different points of an investment cycle. We use a large data set covering hotels in the United States, with rich details on their location, characteristics, and performance. We find that hotels built during hotel construction booms underperform their peers. For hotels built during local hotel construction booms, this underperformance persists for several decades. We examine possible explanations for this long-lasting underperformance. The evidence is consistent with information-based herding explanations.
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Standing out from the Crowd via Corporate Goodness: Evidence from a Natural Experiment
Lei Gao, Jie He & Juan (Julie) Wu
University of Georgia Working Paper, August 2016
Abstract:
We study firms' incentives to engage in corporate social responsibility (CSR) activities by using the natural experiment of Regulation SHO, which relaxes short sale constraints and increases short selling pressure for a group of randomly selected firms. We find that firms experiencing an exogenous increase in their exposure to short sales significantly raise their CSR relative to control firms. The results are more prominent for firms with stronger signaling abilities (higher profitability and fewer financial constraints), and those with stronger signaling needs (more non-fundamental-driven short selling, higher information uncertainty, and more product market competition). Further, firms that indeed increase their CSR after the regulatory shock experience a larger price reversal relative to those that do not. These findings support the argument that CSR is a device actively used by firms to signal their quality.
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Claes Fornell, Forrest Morgeson & Tomas Hult
Journal of Marketing, September 2016, Pages 92-107
Abstract:
A debate about whether firms with superior customer satisfaction earn superior stock returns has been persistent in the literature. Using 15 years of audited returns, the authors find convincing empirical evidence that stock returns on customer satisfaction do beat the market. The recorded cumulative returns were 518% over the years studied (2000-2014), compared with a 31% increase for the S&P 500. Similar results using back-tested instead of real returns were found in the United Kingdom. The effect of customer satisfaction on stock price is, at least in part, channeled through earnings surprises. Consistent with theory, customer satisfaction has an effect on earnings themselves. In addition, the authors examine the effect of stock returns from earnings on stock returns from customer satisfaction. If earnings returns are included among the risk factors in the asset pricing model, the earnings variable partially mitigates the returns on customer satisfaction. Because of the long time series, it is also possible to examine time periods when customer satisfaction returns were below market. The reversal of the general trend largely resulted from short-term market idiosyncrasies with little or no support from fundamentals. Such irregularities have been infrequent and eventually self-correcting. The authors provide reasons why irregularities may occur from time to time.
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Who's Driving This Conversation? Systematic Biases in the Content of Online Consumer Discussions
Rebecca Hamilton, Ann Schlosser & Yu-Jen Chen
Journal of Marketing Research, forthcoming
Abstract:
When consumers post questions online, who influences the content of the discussion more: the consumer posting the question or those who respond to the post? Our analyses of data from real online discussion forums and four experiments show that early responses to a post tend to drive the content of the discussion as much or more than the content of the initial query. Although advice seekers posting to online discussion forums often explicitly tell respondents which attributes are most important to them, we demonstrate that one common online posting goal, affiliation, makes respondents more likely to repeat attributes mentioned by previous respondents, even if the attributes are less important to the advice seeker or support a suboptimal choice given the advice seeker's decision criteria. Firms listening in on social media should account for this systematic bias when making decisions based on the discussion content.
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Data Privacy: Effects on Customer and Firm Performance
Kelly Martin, Abhishek Borah & Robert Palmatier
Journal of Marketing, forthcoming
Abstract:
Although marketers increasingly rely on customer data, firms have little insight into the ramifications of these uses or how to prevent negative effects. Data management efforts may heighten customers' vulnerability worries or create real vulnerability. Using a conceptual framework grounded in gossip theory, this research links customer vulnerability to negative performance effects. Three studies show transparency and control in firms' data management practices can suppress the negative effects of customer data vulnerability. Experimental manipulations reveal that mere access to personal data inflates feelings of violation and reduces trust. An event study of data security breaches affecting 414 public companies also confirms negative effects, as well as spillover vulnerabilities from rival firms' breaches, on firm performance. Severity of the breach hurts the focal firm but helps the rival firm, which provides some insight into mixed findings in prior research. Finally, a field study with actual customers of 15 companies across three industries demonstrates consistent effects across four types of customer data vulnerability and confirms that violation and trust mediate the effects of data vulnerabilities on outcomes.
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The Dynamics of Subcenter Formation: Midtown Manhattan, 1861-1906
Jason Barr & Troy Tassier
Journal of Regional Science, forthcoming
Abstract:
Midtown Manhattan is the largest business district in the country. Yet only a few miles to the south is another district centered at Wall Street. This paper aims to investigate when and why midtown emerged as a separate business district. We have created a new data set from historical New York City directories that provide the employment location, residence, and job type for several thousand residents in the late-19th and early-20th centuries. We supplement this data with additional records from historical business directories. The evidence suggests that early midtown firms appeared there in order to be closer to local residential customers who had been moving north on the island throughout the 19th century. Once several industries appeared in midtown, it triggered a spatial equilibrium readjustment in the 1880s, which then promoted the rise of skyscrapers in midtown around the turn of the 20th century. This process occurred several years before the opening of Grand Central Station in 1913.
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Steven Levitt et al.
Proceedings of the National Academy of Sciences, 5 July 2016, Pages 7323-7328
Abstract:
We report on a natural field experiment on quantity discounts involving more than 14 million consumers. Implementing price reductions ranging from 9-70% for large purchases, we found remarkably little impact on revenue, either positively or negatively. There was virtually no increase in the quantity of customers making a purchase; all the observed changes occurred for customers who already were buyers. We found evidence that infrequent purchasers are more responsive to discounts than frequent purchasers. There was some evidence of habit formation when prices returned to pre-experiment levels. There also was some evidence that consumers contemplating small purchases are discouraged by the presence of extreme quantity discounts for large purchases.